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Stephen Laniel asks about the relationship between Daniel Davies’ and Gary Miller’s accounts of the folk theorem.

I found D2’s excellent gloss on the folk theorem of iterated game theory the other day:

The Folk Theorem in game theory states that any outcome of a repeated game can be sustained as an equilibrium if the minimax condition for both players is satisfied. In plain language, it can be summarised as stating that “if we take strategic considerations into account, there is a game-theoretic rationale for practically anything”. This formulation leads on to my contribution, the Davies-Folk Theorem, which states that “if we take strategic considerations into account,there is a game-theoretic rationale for practically fucking anything” (it’s a fairly simple [corollary]; proof available from author on request).

(The rest of that post is worth reading. So is Thomas Schelling, for that matter. I’ve only read his Micromotives and Macrobehavior, but I want to read The Strategy of Conflict und so weiter.)

Gary Miller refers over and over again to the folk theorem in Managerial Dilemmas, and I could never figure out why — for reasons that D2 makes most clear. Even at the time, Managerial Dilemmas seemed like a strangely theorized take on corporate structure. But then the folk theorem bits were lacquered on top, as though they justified the point he was making. It was very strange to me.

So yeah. Were you thinking your day would start with iterated game theory? Well it has.

I have a dog in this fight, having just written a book that cites both of these accounts. In my opinion, the two are not as different from each other as they might at first seem. D^2 wants to argue against sloppy uses of game theory – and in particular international relations arguments suggesting that states need to do this or that to maintain their reputation. Hence, his suggestion that game theoretic justifications on their own are more or less worthless. Miller, for his part, wants to argue against a reductionist reading of economic theory that suggests that crude Taylorist incentive schemes on their own can lead to efficient outcomes. He shows that incentive compatible mechanisms can’t achieve everything that is claimed on their behalf (it is worth scouting out his paper with Thomas Hammond to understand more precisely who his targets are), but notes that cooperation can still be supported under the folk theorem. Here, he isn’t suggesting that the folk theorem is an explanation itself but instead that it pushes rational choice scholars to look to very different explanations than they are used to. In particular, it suggests that they need to look to the kinds of mechanisms that the fuzzier, more sociological side of management theory has emphasized. There are differences between the Davies and Miller accounts of the folk theorem, but both are aimed at more or less the same target – crude, ‘by their own bootstraps’ rational choice explanations which actually don’t explain nearly as much as their authors imagine.

Readers with other political science questions should feel free to leave them in comments, with the obvious proviso that neither me nor other Monkey Cagers can guarantee that we can answer all of ‘em …